Jun 19, 2023 Form W-9 and FATCA Battles: A Beacon of Hope for U.S. Expats in Israel
In recent years, the plight of American expatriates burdened by the complications of U.S. tax law has become an increasingly frustrating topic. Among the primary concerns for U.S. citizens living abroad is the Foreign Account Tax Compliance Act (FATCA), a tax agreement between the USA and numerous countries designed to combat tax evasion. FATCA has created an obligation for foreign financial institutions to report information about accounts held by U.S. persons to the Internal Revenue Service (IRS). Yet, FATCA has inadvertently placed substantial burdens on many U.S. citizens living abroad in its attempt to prevent tax evasion. Many have struggled in recent years when every bank makes you sign multiple Form W-9 and W-8s. The bankers often don’t know why or what they are having you sign, yet they won’t let you move money unless you go through the process.
However, a recent Belgian Data Protection Authority ruling may represent a promising shift in this situation. The Authority determined that under the FATCA agreement, the transfer of Belgian “Accidental Americans” personal data to the IRS violates the principles of the General Data Protection Regulation (GDPR) established within the European Union. This ruling doesn’t only concern these “Accidental Americans.” It could potentially apply to all individuals protected by the GDPR, including U.S. citizens residing in other E.U. countries with accounts with Belgian financial institutions.
While not part of the E.U., this development is particularly significant for U.S. citizens living in Israel. Given the substantial population of U.S. expats residing in Israel, the Belgian ruling could ignite similar challenges to FATCA’s implementation. It underlines the importance of addressing issues related to data protection and privacy rights that these expats have long raised.
Moreover, the ruling highlights the disproportionate impact of FATCA on “Accidental Americans” – individuals who have U.S. citizenship by birth but little or no other connection to the country. It is a situation that many U.S. citizens in Israel can relate to, with many of them facing similar issues. The potential for this ruling to trigger a re-evaluation of FATCA’s implementation and subsequently lead to amendments that address these concerns could effectively transform the legal landscape for American expats worldwide.
While much uncertainty remains, this decision represents a beacon of hope for a more balanced and equitable future for U.S. expats. It indicates that it is indeed possible to devise regulatory measures that can coexist with respect for individual rights and practical realities.